SAN FRANCISCO, Jan. 2, 2007 (PRIME NEWSWIRE) -- The fourth quarter proved to be the best quarter for U.S. venture-backed companies to achieve public market exits in 2006, with 18 initial public offerings (IPOs) completed -- according to the Quarterly Liquidity Report from Dow Jones VentureOne. The IPOs raised an aggregate total of $1.23 billion.
For 2006 as a whole, there were 56 IPOs completed, raising $3.72 billion, the most IPO activity and largest total raised since 2004.
Venture-backed exits via mergers and acquisitions faltered somewhat in the fourth quarter, with only 75 completed, the fewest in a single quarter this year, and the total amount paid reaching $7.30 billion. For the year as a whole, there were 404 M&As and $31.18 billion paid, nearly even with the 407 acquisitions in 2005 but 4% more was paid for them.
"The fourth quarter has proved to be an active one for venture-backed liquidity, particularly in the form of IPOs, providing proof that promising enterprises are being nurtured in the venture capital market and finding considerable public market support in their successful exits," said Steve Harmston, director of global research for VentureOne. "While M&A activity may have slowed a bit in the fourth quarter, this still remains the most viable option for venture-backed exits in today's market and the prices being paid for these start-ups throughout 2006 has been growing."
For example, for all industries, the median amount paid for the acquired companies in 2006 reached $52 million, up from $47.2 million last year. Meanwhile, the amount raised in equity prior to being acquired was $22.6 million in 2006, up slightly from $20.6 million in 2005. The time between initial equity financing and M&A also grew slightly longer in 2006, about 6 years, up from 5.4 years.
Technology companies remained the dominant industry for M&As in 2006, with 273 in total and $19.33 billion paid for them, 18 more technology acquisitions than last year and a 38% increase in the amount paid for them. The total number of health care acquisitions reached 74, nine fewer than last year, and the amount paid, $6.56 billion, was lower than a year ago. The largest venture-backed M&A of the year was the fourth quarter's $1.65 billion acquisition of YouTube of San Mateo, Calif., by Google (Nasdaq:GOOG).
For IPOs, the health care industry dominated the total number this year, with 28 completed, raising $1.36 billion. But information technology companies performed well in 2006, with 20 completed, raising $1.95 billion, a considerable increase over the 11 technology IPOs that raised just $682.6 million in 2005. In fact, it was the most annual IT IPOs since 2000. The overall pre-money median valuation for IPO companies also increased, to $201.6 million, up from $165.8 million last year. For technology IPOs, the pre-money median valuation was $359.6 million, the highest annual median since 2000. The largest IPO of the year was for broadband telephone service provider Vonage (NYSE:VG) that raised $531.3 million in its May IPO. The largest of the fourth quarter was for data storage company Isilon Systems (Nasdaq:ISLN), which raised $108.6 million in its December IPO.
Across the board, venture-capital backed companies required substantial equity investment before achieving an IPO, a median $51 million in 2006, about the same as in 2005 ($51.4 million). They required a bit more time to go from initial equity financing to IPO, 6.2 years vs. 5.6 years.
The investment figures included in this release are based on aggregate findings of VentureOne's proprietary U.S. research. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.
About VentureOne
Dow Jones VentureOne (www.ventureone.com and www.venturecapital.dowjones.com), a unit of Dow Jones Financial Information Services, has been the leading provider of finance and investment data to the venture capital industry for almost 20 years. Dow Jones VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne.
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